Binance Coin (BNB) was launched almost four years ago at an (almost) giveaway price of 20,000 BNB for one Bitcoin or 2700 BNB for one Ethereum (ETH). This put its first recorded cash price at around $ 0.10 per coin.
Today BNB is trading at $ 350 or around 124 BNB for one BTC and 8.9 BNB for one ETH. Those who entered on the ground floor have made the kind of gains that most crypto investors dream of.
The speed at which BNB is closing the gap in ETH and BTC is impressive and reflects the growth of Binance as a crypto exchange, and Binance Chain as a proprietary blockchain that competes with Ethereum, Cardano (ADA), Solana (SOL ) and Polkadot (DOT) for mastering the new blockchain-based financial architecture that is currently being developed.
While Ethereum, Solana and Polkadot are decentralized networks, meaning that transactions are processed and recorded simultaneously on thousands of computers or nodes around the world, Binance’s smart chain validators are considered to be partially centralized due to the structure in which they are chosen. That gives it some major advantages over decentralized networks like Ethereum and Cardano in terms of low transaction costs and processing speed.
BNB was originally launched as a way for customers of the Binance exchange to pay discounted fees when transacting on the exchange. Since then, BNB use cases have multiplied to include transactions on the Binance exchange, as collateral for crypto loans or to earn passive income.
Brett Hope Robertson (BHR), Investment Analyst at Revix, is available to help us dig deeper into BNB and explain its uses, attractions, and pitfalls.
What makes BNB so exciting?
BHR: The most obvious attraction that everyone looks at at first is the price increase. BNB has risen more than 370,000% during its useful life. It now sells for $ 350 (R5 250), compared to around $ 0.10 (R1.30) when it was first released on the market. This means that an investment of just R100 would have earned you more than R370,000.
BNB Price 2017-2021 in USD
While many love to look at the price, I believe that Binance is a company that is taking the world by storm. It has a success story like no other.
Binance has come from nowhere to become the world’s largest crypto exchange with volumes five times the size of its closest competitor, but it is more than an exchange. It is taking care of everything crypto, from exchange to smart contracts and DeFi [decentralised finance] with everything in between. Their native blockchain, called the Binance Smart Chain (BSC), is taking on Ethereum, Solana, Cardano, and more in what’s called the ‘smart contract wars’, and they are doing very well. BSC is the second largest smart contract player behind Ethereum. Like Solana and Cardano, the BSC offers faster transaction times, lower fees, and a scheduling ability that makes it easier for developers to create complex smart contracts.
This means that application developers working on Ethereum can migrate their software to Binance Chain. Ethereum’s high ‘gas’ fees and slow transaction speeds are the main choke points that the network is trying to overcome, but it may take years before these choke points are resolved.
There is a race underway for dominance of the DeFi space, although it could be argued that Binance is possibly closer to centralized finance (CeFi). In the world of DeFi, you can already lend, borrow, and earn passive income, but an astonishing array of new financial products is being developed on these networks. You will be able to purchase insurance and other products without the need for an intermediary such as an agent or a bank or a stock exchange, using what are called ‘smart contracts’. Like a contract, a smart contract allows the terms of an agreement or deal to be executed. However, what makes it “smart” is that you can perform this contract without the need for a third party. It is incredibly exciting and Binance is taking great strides to attract the development of these new financial instruments.
What are the main advantages of including BNB in my cryptocurrency portfolio?
BHR: By buying BNB, you gain exposure to the largest crypto exchange, the second largest smart contract player, and likely have the widest range of product offerings for its clients. It’s almost starting to become the Amazon of the crypto space, offering ‘staking’ [where you can invest and earn interest on cryptos], credit cards, vaults, crypto custody, loans, NFT [non-fungible tokens], options and much more.
As I mentioned earlier, there is a race for the mastery of smart contracts and the unfolding of the new financial era. Binance is one of the contenders, and funny enough, it is one that is not really talked about, I think this is a mistake. No one knows who will win this race and therefore it makes sense to diversify your risk and own a crypto portfolio with multiple contenders.
One of the criticisms of cryptocurrencies is the erroneous claim that everything is hype, without business arguments. Certainly that is no longer the case. These networks are generating massive amounts of fees, which can be tracked and measured. Binance Chain and its smart chain network (Binance Smart Chain) have impressive technology behind them, and these networks have become formidable forces in this new financial world that we are entering.
Aren’t there some risks with Binance?
BHR: Yes, price runs the risk of being one of them. The price is volatile compared to traditional assets, but crypto investors are used to that. Another risk is that Binance is receiving regulatory pressure around the world, but appears to be doing what it takes to stay on the right side of regulators.
There are risks, but these risks are somewhat manageable. Those looking for a diversified crypto portfolio will likely have some exposure to BNB.
How has BNB behaved in recent times?
BHR: BNB is up 1200% in the last 12 months. It has been as high as $ 704, in May of this year, and has since dropped to $ 350.
It is extremely volatile, as are most cryptocurrencies, and one must be prepared for wild price movements, both up and down. Dollar cost averaging is a proven strategy when investing in cryptocurrencies over time. In other words, you invest in BNB a regular amount once a month or once a week, without trying to change the price.
How can South Africans buy BNB? Does Revix offer any promotions?
BHR: BNB was recently launched as a standalone cryptocurrency on Revix, and anyone who buys BNB with ZAR or GBP can do so without having to pay any fees until September 30. This is another great reason to add some BNB to your cryptocurrency portfolio.
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For more information please visit www.revix.com
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